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TRINORTH ENGAGES CHIEF INVESTMENT OFFICER AND PROPOSES TO RAISE NEW CAPITAL AND TO DISTRIBUTE FERONIA SHARES TO SHAREHOLDERS

^{Published on 2011-06-03 14:36:10 - Market Wire}
 

TORONTO, June 3, 2011 /CNW/ - TriNorth Capital Inc. ("Trinorth" or the "Company") (TSXV: TRT) is pleased to announce today that it has entered into an employment agreement with Roger Dent to engage him as its new President, Chief Executive Officer and Chief Investment Officer, effective upon and subject to the completion of a brokered private placement financing of subscription receipts led by Mackie Research Capital Corporation ("Mackie") as lead agent in a syndicate of agents (collectively with Mackie, the "Agents"), to raise gross proceeds of a minimum of $20 million and a maximum of $30 million (subject to an over-allotment option of $5 million exercisable by the Agents at any time up to 48 hours before closing) (the "Financing"). Each subscription receipt will entitle the holder thereof to receive, upon exercise at any time after satisfaction or waiver of all of the escrow release conditions required to complete the Financing, without payment of additional consideration, one common share of the Company on a post-Consolidation (as defined below) basis. Subject to completion of the Financing, the Company also intends to:

• deliver the 17 million shares of Feronia Inc. ("Feronia") (TSXV: FRN) owned by the Company to a trustee for shareholders of the Company as a payment on the reduction of the stated capital of Trinorth common shares (the "Distribution");
  
  
• consolidate its existing common shares on the basis of one post-consolidation share for every three pre-consolidation shares (the "Consolidation");
  
  
• change its name to Egmont Bay Investments Inc. or such other name as is acceptable to the Company and the TSXV (the "Name Change"); and
  
  
• appoint three new directors to replace three of the existing directors on the Company's board of directors (the "Change in Directors").

The Company has called an annual and special meeting of shareholders to be held on June 28, 2011 (the "Meeting") to approve, among other things, the Financing, Distribution, Consolidation and Name Change. TSXV approval is also required for the Financing, Distribution, Consolidation and Name Change.

Private Placement Financing

The Company has engaged Mackie, as lead agent and sole bookrunner, to lead the proposed Financing on a best efforts basis. The subscription receipts will be offered at $0.07 per subscription receipt, which offer price was determined based on arm's length negotiations between the Company and Mackie, taking into consideration the Distribution and the Consolidation.  Based on a minimum $20 million raise, 285,714,283 subscription receipts (exercisable for 285,714,283 common shares on a post-Consolidation basis) will be issued.  Based on a maximum $30 million raise and assuming full exercise of the $5 million over-allotment option, 500,000,000 subscription receipts (exercisable for 500,000,000 common shares on a post-Consolidation basis) will be issued.

Upon satisfaction of the escrow release conditions, the subscription receipts shall become exercisable by the holders thereof at anytime, without payment of additional consideration, on or before the date which is four months plus a day after the closing date of the Financing (the "Expiry Date"), and shall be automatically exercised (if not previously exercised) on the Expiry Date.  The Company has agreed to use its reasonable best efforts to file a prospectus (the "Qualifying Prospectus") to qualify the post-Consolidation common shares underlying the subscription receipts prior to the Expiry Date.

Mr. Dent, together with his associates and family members, have agreed to subscribe, directly or indirectly, for up to 40% of the Financing.  Assuming they subscribe for 40% of the Financing, on a $20 million Financing Roger Dent and his associates and family members will hold approximately 34%, and on a $35 million Financing (assuming full exercise of the over-allotment option) Roger Dent and his associates and family members will hold approximately 36%, of the outstanding common shares on a post-Consolidation basis upon exercise of their subscription receipts.

The Financing is expected to close on or before June 30, 2011, or such other date as the Company and Mackie may agree.  Proceeds from the Financing, net of the Agents' commission and expenses, will be deposited with and held by an escrow agent mutually agreed upon by the Company and the Agents.  Such proceeds, together with all interest and other income earned thereon shall be released from escrow upon satisfaction or waiver of the escrow release conditions on or before the release deadline of 11:59 p.m. (Toronto time) on July 25, 2011, unless otherwise agreed by the Company and Mackie, on behalf of the holders of subscription receipts.  If the escrow release conditions are not satisfied or waived prior to the release deadline, each holder of subscription receipts shall be entitled to the return of its aggregate subscription price promptly after the release deadline.

Proceeds raised under the Financing will be used to fund the Company's investments as well as general and administrative expenses.  The Company's investment objective is to provide long-term capital growth by investing primarily in equity-related securities of Canadian emerging and established companies having superior prospects for future growth or capital appreciation. The Company's board of directors is responsible for setting the investment guidelines and policies of the Company, and may amend such investment guidelines from time to time as appropriate.  The Company's CIO will have authority to manage and make investments on behalf of the Company in accordance with the investment guidelines.  It is expected that the Company's investments will consist primarily of smaller capitalization stocks, with the intent of participating early in these emerging opportunities. The Company may allocate a portion of its assets to private companies where appropriate. However, it is expected that the majority of the Company's assets will be invested in securities traded publicly on major stock exchanges or over-the-counter. Assets may also be invested in other securities, which may include warrants as well as money market and fixed income securities if, in the opinion of the CIO, such investment is prudent given the prospects for return and the risk factors associated with investment in equity securities at any given time.  The Company anticipates being a passive investor in most or all of its portfolio investments.  However, the Company may on occasion take an active role in certain investments.

The Agents will receive a cash commission equal to 6% of the gross proceeds raised in the Financing (excluding the subscriptions by Mr. Dent and his associates and family members, and by Mackie). The Agents will also receive such number of compensation options equal to 9% of the number of subscription receipts sold in the Financing (excluding the subscriptions by Mr. Dent and his associates and family members, and by the Agents, if applicable) exercisable for, without payment of additional consideration, the same number of compensation warrants at any time and will be exercised automatically on the earlier of (i) the Expiry Date and (ii) the fifth business day after a receipt or deemed receipt, as applicable, is issued for the Qualifying Prospectus by the securities regulatory authorities in each of the provinces of Canada where subscription receipts are sold.   Each compensation warrant will entitle the holder thereof to one post-Consolidation common share upon exercise thereof and payment of the exercise price equal to the issue price of the subscription receipt, subject to the terms of the compensation warrant.   The compensation warrants may be exercised at anytime on or before the date which is 24 months from the closing date of the Financing.

In addition, as lead agent and sole bookrunner, Mackie will receive a non-refundable legal work fee of $10,000 upon its engagement, and an additional work fee of $50,000 on completion of the Financing.  The Company will also reimburse the Agents for reasonable expenses incurred in connection with the Financing.

As the Financing will result in a change of control and a change of management within the meaning of TSXV Policy 3.2 - Filing Requirements and Continuous Disclosure, it is subject to both TSXV and shareholders' approval.  In addition, as the offer price is less than the maximum "Discounted Market Price" permitted under TSXV policies, as a condition to final TSXV approval of the Financing, the offer price of $0.07 per subscription receipt is also subject to shareholders' approval.

New Chief Investment Officer

Subject to completion of the Financing, the Company will internalize its investment management by engaging Mr. Dent as President, Chief Executive Officer and Chief Investment Officer. Pursuant to the terms of an employment agreement entered into between the Company and Mr. Dent, Mr. Dent will join Trinorth on an exclusive basis.

It is anticipated that his investment approach will be similar to the approach of the funds previously managed by Mr. Dent.  He takes a bottom-up approach to investing, with a focus on undiscovered opportunities.  He favours earnings turnarounds, hidden assets, undervalued small cap companies and early stage companies. Investments would typically be considered in all industry sectors and would not be limited to the resource sector.   All investment decisions will be made in accordance with the Company's investment guidelines as determined by the Company's board of directors from time to time.

"I am strongly looking forward to joining Trinorth. In my opinion, Trinorth is an extremely attractive platform for small cap investment. The Company has a very large tax loss carry-forward position that we will be able to use to shelter our investors' gains for an extended period of time.  Post-financing, we expect to have a stable pool of funding which will permit us to fully focus on our investments and not have investment decisions negatively impacted by short-term inflows and outflows of funds.  We also plan on running the Company with a tight cost structure. I expect to make a large personal investment in Trinorth and I hope to see this investment and the investments of those who participate in this financing round grow on a tax-deferred basis over the long term," said Mr. Dent.

Mr. Dent has advised the Matrix Small Cap Fund since 2003, the Matrix Small Companies Fund since 2004 and the Matrix Growth Fund since 2010.  He has been the portfolio manager of the Matrix Small Companies Fund since its inception in September 2004.

According to Globefund.ca, a $10,000 investment in the Matrix Small Cap Fund in January 2003, when Mr. Dent began advising the fund, had grown to a value of over $51,000 on April 30, 2011 (after all fees and expenses).  A similar $10,000 investment in the TSX Total Return Index would have a value of under $26,000.  The fund is up 38.0% in the 12 months ending April 30, 2011 and is up 20.4% on a year-to-date basis as of the same date.  Similarly, a $10,000 investment on the day of the creation of the Matrix Small Companies Fund would have had a value of $24,876 on April 30, 2011 (after all fees and expenses). In comparison, an investment in the TSX Total Return Index would have a value of $19,057. The fund is up 66.6% in the 12 months ending April 30, 2011 and is up 28.4% on a year-to-date basis as of the same date.

In connection with the engagement of Mr. Dent, upon completion of the Financing and the related transactions described herein, each of John Pennal and John Anderson has agreed to resign as the Company's President, Chief Executive Officer and Chief Financial Officer, respectively.

The employment agreement has an initial term of two years and may be terminated by the Company after the initial term on 120 days notice.  As President, Chief Executive Officer and Chief Investment Officer, Mr. Dent will provide Trinorth with all necessary management and administrative services, including without limitation, making investment decisions in accordance with the Company's investment guidelines, engaging, and funding the engagement of, a Chief Financial Officer ("CFO") or a person(s) to perform the functions of a CFO for the Company, dealing with banks and custodians, ensuring the Company's compliance with all regulatory requirements and stock exchange listing requirements, and providing the premises for the Company. In consideration for his services, Mr. Dent will receive an annual base fee equal to 2% of the average monthly net asset value of the Company and an annual performance fee equal to 20% of the excess in the net asset value on the last day in a calendar year (plus any dividends and return of capital paid in that year) over a benchmark net asset value increased by a "hurdle" of 8%.

Distribution of Feronia Shares

Subject to completion of the Financing, Trinorth intends to:

• reduce the stated capital of Trinorth common shares (on a pre-Consolidation basis) by an amount equal to the fair market value on the Distribution date (immediately after the completion of the Financing) of the 17,000,000 common shares of Feronia held by Trinorth; and
  
  
• distribute such common shares of Feronia held by Trinorth on the Distribution date to its shareholders of record as at June 24, 2011 (the Distribution record date) as a payment on the reduction of the stated capital of the Trinorth common shares, on a pro rata basis (approximately one Feronia share for every 8.8 Trinorth common shares on a pre-Consolidation basis).

As the Distribution involves substantially all of the Company's assets under applicable corporate laws and the transfer in escrow of some of the Feronia shares, it is subject to both TSXV (to the extent required to transfer the Feronia shares subject to the existing TSXV value security escrow agreement described below) and shareholders' approval.

After the Distribution, but before giving effect to the Financing, there will be issued and outstanding the same number of Trinorth common shares as are outstanding immediately prior to the Distribution, and Trinorth shareholders will hold shares in both Trinorth and Feronia.  Trinorth common shares issuable pursuant to the Financing will not be eligible to participate in the Distribution.

50% of the Feronia shares to be distributed are subject to a TSXV value security escrow agreement dated September 9, 2010 between Feronia, Equity Financial Trust Company ("Equity") as escrow agent and certain Feronia shareholders including Trinorth.  In addition, all of the Feronia shares to be distributed are subject to a voluntary lock-up agreement between Cormark Securities Inc. ("Cormark") and certain Feronia shareholders including Trinorth, which restricts Trinorth's ability to sell its Feronia shares until March 31, 2013, except with Cormark's prior written consent.  Accordingly, subject to shareholders' approval, Trinorth intends to deliver the 17,000,000 Feronia shares to a trustee to hold such shares on behalf of Trinorth shareholders until expiry (or early termination or with the consent of the TSXV or Cormark, as applicable) of the value security escrow agreement and the lock-up agreement.

Consolidation

Subject to completion of the Financing and to shareholders' approval, the Company intends to amend its articles to consolidate its common shares (excluding the common shares to be issued pursuant to the Financing) on the basis of one post-consolidation common share for every three pre-consolidation common shares.

Name Change

Subject to completion of the Financing and to shareholders' approval, the Company intends to amend its articles to change its name to "Egmont Bay Investments Inc." or to such other name as is acceptable to Trinorth and the TSXV.

Change of Directors

Subject to completion of the Financing, all of the existing directors of the Company except for John Pennal and Wesley Hall, namely Ravi Sood, Amar Bhalla, and Riyaz Lalani, have agreed to resign from the Company's board of directors and be replaced by Roger Dent, Andrew Moor, and William Shaw. The biographies of the proposed directors will be included in the management information circular for the Meeting.

Cautionary Notes

This press release contains forward-looking statements regarding future growth, results of operations, performance, business prospects and opportunities involving the Company.  Words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, are forward-looking statements within the meaning of securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of the Company. These statements are not historical facts but instead represent only management's and the board's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve known and unknown risks, assumptions, uncertainties, and other factors that may cause actual results or events to differ materially from what is expressed, implied or forecasted in such forward-looking statements. In addition to the factors the Company currently believes to be material such as, but not limited to, its ability to achieve its investment objectives, its dependence on the efforts of management, risks associated with fluctuations in net asset value and valuation of the Company's portfolio, its ability to operate on a profitable basis, changes in interest rates, evaluation of its provision for income and related taxes, and other factors, such as general, economic and business conditions and opportunities available to or pursued by the Company, not currently viewed as material could cause actual results to differ materially from those described in the forward-looking statements. Although the Company has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be anticipated, estimated or intended. Accordingly, shareholders should not place any undue reliance on forward-looking statements as such information may not be appropriate for other purposes. The Company does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this information circular except as required by applicable law.

Acceptance and completion of the Financing and the Distribution are subject to the satisfaction of a number of conditions, including but not limited to, TSX Venture Exchange acceptance and approval by shareholders. Acceptance and implementation of the Consolidation and Name Change are also subject to the satisfaction of a number of conditions, including but not limited to, approval by shareholders. There can be no assurance that the Financing or any of the other related transactions described herein will be completed as proposed or at all.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) has in any way passed upon the merits of the proposed transactions and neither of the foregoing entities has approved or disapproved of the contents of this press release.